A financial instrument trading system, such as a futures exchange, referred to herein also as an “Exchange”, such as the Chicago Mercantile Exchange Inc. (“CME”), provides a contract market where financial instruments, for example futures and options on futures, are traded. Futures is a term used to designate all contracts for the purchase or sale of financial instruments or physical commodities for future delivery or cash settlement on a commodity futures exchange. A futures contract is a legally binding agreement to buy or sell a commodity at a specified price at a predetermined future time. An option is the right, but not the obligation, to sell or buy the underlying instrument (in this case, a futures contract) at a specified price within a specified time. The commodity to be delivered in fulfillment of the contract, or alternatively the commodity for which the cash market price shall determine the final settlement price of the futures contract, is known as the contract's underlying reference or “underlier.” The terms and conditions of each futures contract are standardized as to the specification of the contract's underlying reference commodity, the quality of such commodity, quantity, delivery date, and means of contract settlement. Cash Settlement is a method of settling a futures contract whereby the parties effect final settlement when the contract expires by paying/receiving the loss/gain related to the contract in cash, rather than by effecting physical sale and purchase of the underlying reference commodity at a price determined by the futures contract, price.
Typically, the Exchange provides for a centralized “clearing house” through which all trades made must be confirmed, matched, and settled each day until offset or delivered. The clearing house is an adjunct to the Exchange, and may be an operating division of the Exchange, which is responsible for settling trading accounts, clearing trades, collecting and maintaining performance bond funds, regulating delivery, and reporting trading data. The essential role of the clearing house is to mitigate credit risk. Clearing is the procedure through which the Clearing House becomes buyer to each seller of a futures contract, and seller to each buyer, also referred to as a novation, and assumes responsibility for protecting buyers and sellers from financial loss due to breach of contract, by assuring performance on each contract. A clearing member is a firm qualified to clear trades through the Clearing House. A clearing house may also analyze a market and/or open positions of traders to assess a risk of traders' current positions. The analysis may involve an application of a margin model to quantify the risk of positions held by a trader. Performance bonds may be required from traders to balance this determined risk.
Current financial instrument trading systems allow traders to submit orders and receive confirmations, market data, and other information electronically via a network. These “electronic” marketplaces are an alternative to pit or open outcry based trading systems whereby the traders, or their representatives, all physically stand in a designated location, i.e. a trading pit, and trade with each other via oral and hand based communication. Anyone standing in or near the trading pit may be privy to the trades taking place, i.e. who is trading, what they are offering to trade (price and quantity), and what ultimately trades. Electronic trading systems attempt to replicate the trading pit environment in a marketplace of electronic form. In doing so, electronic trading systems ideally offer an efficient, fair and balanced market where market prices reflect a true consensus of the value of traded products among the market participants, where the intentional or unintentional influence of any one market participant is minimized if not eliminated, and where unfair or inequitable advantages with respect to information access are minimized if not eliminated.
Traders and/or electronic marketplaces may use references for pricing and/or performance bond determination. These references may include a dataset that represents a forward curve, also known as a future curve or forward price curve. A forward curve represents a current price for a product in a specific location on a specified date in the future. These forward curves may be derived using actual trades for the product, however, data relating to specific positions or increments of the data may be missing or faulty due to a lack of trades relating to contracts for the product having the criteria indicated for that position. For example, a product may be sold in an electronic marketplace having contracts that require delivery in 10 months, 11 months, 12 months, and 13 months. If no contract is sold for the 11 month delivery contract, no actual data may be available for that 11 month position of the forward curve. In addition, the basic product data may involve erroneous data resulting from atypical trades, system errors, or other reasons. Also, a lack of data, or erroneous data, in a basic product, such as a product upon which prices for other products are derived, may result in anomalous values in the derived product forward curves. As such, systems operating with these forward curves as references are slowed due to the processing of incomplete and/or inaccurate data, which in itself will cause the system to provide faulty results and data.
Accordingly, there is a need for a system and method that can provide complete, consistent, and reasonable data to allow for increased system efficiency and accuracy of data output by the system. The complete, consistent, and reasonable data may also be used by downstream systems to provide more efficient and accurate output data, thus causing an overall increase in interrelated system abilities and accuracy.